2029 budget cap has Supervisors vexed

Penalizing communities

At the same time, we tout we want to have a growth state and be growth communities and we want to find ways to lure people to Iowa, we’re in effect putting in state laws that penalize communities if they grow.”

Tom Schulz, Lee County Supervisor

LEE COUNTY – Lee County Supervisors are starting to worry just a bit about the future of the county’s property tax levy.
At Monday’s regular Board of Supervisors meeting, Supervisor Tom Schulz brought up details from a conference last week that addressed the state’s new property tax law that will put a $3.50 general fund levy cap on the state’s 99 counties in four years.
The conference looked at how counties in the state will be impacted by the new law passed during the last session. He said there is some clarity now on the new law, but there is still a lot of confusion about how the new law encourages growth in the state.
“There’s still not great clarity, but there’s more clarity than there was prior to attending. Some things just aren’t known until they are known and that includes the rollbacks. We need to know what that’s going to be,” Schulz said.
“The legislation, without a doubt, penalized any community, whether it be county or city. At the same time, we tout we want to have a growth state and be growth communities and we want to find ways to lure people to Iowa, we’re in effect putting in state laws that penalize communities if they grow.
“I do think there’s some desire to look at how some of this stuff was structured. We’ll see. I think what they’ve assured is that property tax will be still in the agendas of state legislators this year. So, hold on. We don’t know where we’re going yet.”
What is known is that the county has four future budget years to get down to the $3.50 cap, which goes into effect with the 2029 fiscal year.
Supervisor Garry Seyb said the county took significant difficult steps heading into this fiscal year after having to deal with a multitude of unexpected expenses, including a critical upgrade of the county’s IT department, and absorbing costs associated with the closing of the hospital in Keokuk.
“We have responded to a significant emergency this last year and making our fund balance how it is by doing the things we needed to do. But (the budget) will become that way again if we don’t take steps in those four years to address our expenses,” he said.
“We’re going to have to contract our levy. We have to. They’re going to force us to. If we contract in our levy, that could mean less money coming in and that means our expenses need to drop where we can. That’s why we’re starting to look and address it.”
Supervisor Matt Pflug said there isn’t a lot of room now in the budgets.
“There’s not a lot of wiggle room in these department budgets, Pflug said. When you’re cutting $500 here and there that doesn’t get us where we need to go.”
Seyb said there needs to be a concerted effort to inform legislators of the pinch that kind of a cap could bring about.
“We need to let our legislators know now that, ‘hey, this $3.50 may not be a reasonable expectation to get to that in four years’. It may take longer, or we may never get to that.”
Schulz said the conference was set up to go over the new tax law, how it will affect counties and how calculations are handled.
But he said the moves Lee County made in the past year have positioned them better to handle the cap than a lot of counties in the state. He added there still isn’t enough information from the state to even begin local conversations around mitigating the upcoming cap.
County Engineer Ben Hull said the county at least has the knowledge that they need to get back to $3.50 so they can look at a 25% per year reduction to get there.
Budget Director Cindy Renstrom said the county cannot wait til the last year to make the adjustment or the county could find itself in the same situation it was in earlier this spring, but without the infusion of America Rescue Plan Act funding.
Seyb agreed with Renstrom’s analysis.
“The take away is this board cannot be happy with where it’s at for the next two or three years and then try to go from where were at now $5.85 to $3.50 in one year or we will be in the same spot that we just dug ourselves out of, with no ARPA funds to back that up,” he said.
Renstrom said the county will also see additional expenses because the law requires counties to do mailers outlining the property tax changes before going to public hearings on budget approvals.
Tom Schulz said that’s the key.
“That’s a mouthful, because basically we need to know where we’re at before we know where we’re at.”
Seyb said more than 30% of the state's counties are currently over the $3.50 cap.
Renstrom said there is still some confusion about using supplemental levies because it’s unclear whether counties will have to be at the max rate of $3.50 to trigger the supplemental levy. She said they were told the two aren’t tied together anymore, but a different session on rural supplemental said they are still tied together.
Seyb said there appears to be more clarification needed on the law.
Lee County Sheriff Stacy Weber asked the board to give department heads plenty of notice so they can possibly use attrition to make the cuts over the next four years, rather than all at once.
Seyb said unless there’s further clarification the county isn’t aware of, or a fund that will be made available, getting back down to $3.50 will be very difficult.
“Unless there’s revenue coming from somewhere or there is a supplemental fund that we’re able to access that we weren’t before, that is going to be a significant number,” Seyb said.